Columbia Sportswear: Warm Weather Woes

Feb. 10, 2006
Oregon-based outerwear manufacturer deals with unseasonably warm winter with acquisitions, branding and "One Tough Mother."

When much of your livelihood depends on cold temperatures, a spring-like winter could deliver a gloomy forecast.

Indeed, Columbia Sportswear Co. -- one of IndustryWeek's IW 50 Best Manufacturing Companies in 2005 -- reported a 7.1% decrease in net income for fourth-quarter 2005 compared with fourth-quarter 2004.

However, Columbia had forecasted a bigger net income loss -- between 8% and 12%. The better-than-expected numbers, along with a 4.1% increase in net sales ($314.1 million for the quarter ended Dec. 31, 2005), put the Portland, Ore.-based manufacturer in a more favorable position.

"Fourth-quarter sales were driven by the continued strength of our footwear and sportswear product categories," Tim Boyle, president and CEO, said in a Jan. 26 press release. "Outerwear sales were down in the quarter, but not to the degree initially expected, due to healthy outerwear re-orders from U.S. retail customers late in the quarter."

Columbia Sportswear Co.
At A Glance

Columbia Sportswear Co.
Portland, Ore.
Primary Industry: Apparel
Number of employees: 2,387
2004 In Review
Revenue: $1.1 billion
Profit Margin: 12.7%
Sales Turnover: 1.2
Inventory Turnover: 4.1
Revenue Growth: 15.1%
Return On Assets: 17.7%
Return On Equity: 21.6%
To further its foothold in the shoe industry, Columbia -- known for its outerwear -- recently acquired Seattle-based footwear company Montrail Inc. for $15 million, plus the assumption of certain liabilities. The move is a strategic one considering Columbia footwear sales for fourth-quarter 2005 increased nearly 20%, while outerwear sales decreased 4.7%.

The Montrail brand adds to Columbia's other acquired shoe brands -- Sorel cold-weather boots and Mountain Hardwear.

While the addition of Montrail means more market share in the shoe industry, Columbia remains cautious on its 2006 outlook.

"Based on our reported spring order backlog and a shift in timing of shipments for the first quarter, we currently expect revenue growth for the first quarter of 2006 of approximately 1% and net income decline of approximately 25% compared with first quarter 2005," Boyle said. "This guidance does not include projected first-quarter financial performance for Montrail. We expect Montrail to be neutral to first-quarter earnings and slightly dilutive to earnings for the full year."

Boyle also noted that spring product sales account for a small percentage of Columbia's overall business. The bulk of its revenues and profits come in the second half of the year.

In addition to acquisitions, the company is concentrating on its international market.

In January 2005 the company created an international market development manager position to focus on the company's European distributors located in Russia, Czech Republic, Poland, Hungary, Switzerland, Norway, Turkey and Greece.

The position produced positive results. European sales increased 21.6% for fourth-quarter 2005 compared with same-quarter results in 2004.

One result of increased focus on the international market is Columbia Sportswear's joint branding effort with Nissan Europe SAS. The companies have launched the Nissan X-Trail Columbia Edition.

"This collaboration will complement our marketing efforts as we work to build brand awareness across Europe . . . ," said Paul Gils, Europe general manager, in a Jan. 25, 2006, press release.

The company also continues to promote brand awareness in the U.S. via its apparel sponsorship of the Jeep King of the Mountain Series, a professional snow racing series.

Additionally, Columbia signed a license agreement with New York-based World Wide Cycle Supply Inc. to design, manufacture and market a line of Columbia Sportswear branded bicycles.

For Columbia, adapting to changing weather is nothing new.

The nearly 70-year-old company got its start as a family-owned hat distributorship named the Columbia Hat Co. The owners, Paul and Marie Lamfrom, were frustrated by poor deliveries from suppliers so they started manufacturing products themselves.

In 1948 the Lamfrom's daughter, Gert, married Neal Boyle. Boyle soon took over as head of the growing company and remained there until his death in 1970.

After Neal's death, Gert enlisted the help of her son Tim, Columbia's current president and CEO.

To distinguish the company from the competition, advertising soon capitalized on the mother-son team.

The duo can be seen in the company's commercials playing on their often-tumultuous relationship.

Indeed, Mother Boyle is shown as a tyrant who makes sure Columbia's products can stand up to her tough standards. So tough that its "Tested Tough" television ads have been banned in Russia because they are too violent.

In one commercial, Mother Boyle pushes Tim into a cement mixer to make sure Columbia's products withstand the abuse. Another commercial shows Gert shooting Tim with a blow dart and dumping him on a glacier.

Despite her tough image, Gert Boyle has a soft spot for children.

All profits from her autobiography, "One Tough Mother, Success in Life, Business and Apple Pies," (2005, WestWinds Press) will benefit Special Olympics International and The Multnomah/Washington County Casa For Kids.

Cover art for the book features a gruff-looking Gert sporting a "Born to Nag" tattoo. While meant as tongue-in-cheek, nagging certainly has proved profitable for the $1 billion company.

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